When Will Digital Music Sales Overcome CDs?

In this era, where digital seems to dominate every other format, I am still a sucker for purchasing a physical CD. Something about holding the album art in my hand, turning the shiny music disc over and over, sliding the device into the drive — I just don’t get the same satisfaction from a digital download. Call me a Luddite, call me what you will. I just can’t accept that I may never own a physical piece of music again. This is the same attitude that keeps me from joining the eReader revolution . . . at least until that particular technology improves.

Come to find out, I’m not alone. CDs are still the most common method for consumers in the United States to enjoy their music. In short — CDs rule the music market.

But not for long. Sure, CDs still account for well over sixty percent of all music sold in the first six months of 2009. There is new information today that suggests that digital downloads of music files are quickly gaining speed. This according to a report released this week by a research group that charts music and other sales — the NPD Group.

The trend goes something like this. Digital music sales increase between 15 percent and 20 percent every year. Meanwhile, CD sales drop at just about an equal pace, between 13 percent and 18 percent a year. It is only a matter of time before purchasing that must have album on a plastic disc will be a thing of the past, an old fashioned attempt to get in touch with a part of my past. Much like the vinyl collectors of the past ten years or so, I may have to trudge to a low lit store full of hipsters and snobs to get my fix of 90s-era alternative music. At least, on CD.

The “tipping point”, as NPD likes to put it, will come in 2010.

Russ Crupnick, the vice president of the NPD Group who concentrates his work on analysis of the entertainment industry, says that 2009 and 2010 will represent “a dead heat” between sales of music in digital formats and the sales numbers for CDs. NPD is amazed by the spped that digital music sales have become a real competitor with CD format. NPD reports that digital sales represented only one out of every five songs sold just two years ago. I think most people believe that CDs died out as a reliable format long ago. The truth is that CDs are still the most common audio format, though “the assumption is that [CD sales died out] . . . five years ago,” said Russ Crupnick.

In fact, the numbers are much closer, at least here in America. According to NPD’s research, there are still 250% more people who buy CDs regularly as those who buy digital music. NPD predicts that by 2011, digital sales will far outreach CD sales.

In 2008, digital music sales totalled nearly $2 billion, a healthy number for sure. By the same measure, CDs and other physical units of music represents nearly $9 billion in sales, these numbers according to the Recording Industry Association of America. That’s a huge disparity between two numbers that most people thought were much closer. While over $9 billion in sales sounds remarkable for a format that most people were ready to bury, remember that CD sales are dropping $1 billion a year or more.

The face of the leading music retailers are changing too. Gone are the days when my friends and I would load up the car, head to Circuit City or Best Buy or any of the big box stores and load up on new released. Now, the number on music retailer is Apple’s iTunes service. Music downloads from iTunes make up more than a quarter of all music sales in the United States. This number is up from 20 percent in 2008 and just 14 percent in 2007. With digital sales galloping ahead and CD sales falling by the wayside, it doesn’t take a consumer group to tell you that digital will soon far outclass CDs in terms of sales.

The bottom line is this — American consumers are buying more and more of their music online. Some industry analysts suggest that customers are illegally purchasing as much as 10 times more music through peer to peer Web presences and other illegal sources. If the recording industry was somehow to turn those illegal purchases into legal ones, digital purchases would far outweight physical CD sales.

The move to digital music has had a wide range of other impacts on the music industry — the biggest in my opinion is the fact that most online shoppers aren’t likely to buy entire albums, preferring to cherry pick the singles they want. This limits the artistic impact of a musician or band’s release, and limits the income that retailers make off music.